#LaborDay 2017: Working Harder for that #Home Down Payment

As the long Labor Day weekend kicks off, we’re reminded that people across the USA are working even harder to achieve the “American Dream” of homeownership, but many worry that dream is getting more difficult to achieve.

“Homeownership is affecting this generation in much the same ways it has affected previous generations, but with a twist,” says The Collingwood Group Managing Director Tom Booker. “Down payments have been a challenge for young borrowers, as is qualifying for a mortgage for new homebuyers, with heightened credit underwriting standards and the lack of housing supply making matters worse. The twist is that while today’s interest rates are low and employment is robust, wages have not risen to keep up with rising home prices.”

A recent survey shows that most millennials still want to buy and own a home — and that they consider it to be a fundamental part of the “American dream.” However, ValueInsured’s quarterly survey revealed that even among non-homeowning millennials interested in buying homes “within the next year,” their confidence in their ability to do so was below 50 percent.

In summer 2016, confidence in homebuying rose to 47 percent of millennials. Now, in the summer 2017, that number is 34 percent, its lowest percentage in the last 18 months.

In surveys consistent year after year, about eight in 10 millennials say they want to buy homes. In 2016, 34 percent of all home purchases were by millennials.

According to Bank of America’s lead executive in consumer lending D. Steve Boland, “The overwhelming majority of millennial homeowners say their current home is a ‘stepping stone’ to their forever home.”

Speaking of Labor Day: Jobs Report: Good News Ahead for Housing, Mortgage Industries
Employment boomed in August, according to the ADP National Employment Report.

The report predicts an increase of 237,000 jobs in August, up significantly from last month’s prediction of 178,000.

Source: ADP, Moody’s Analytics

“The job market continues to power forward,” Moody’s Analytics Chief Economist Mark Zandi said. “Job creation is strong across nearly all industries. Mounting labor shortages are set to get much worse.”

Hurricane Harvey Housing WoesAfter search-and-rescue efforts wind down for survivors of Harvey, federal officials warned Texas that housing for thousands of displaced residents could be a long-term problem that in prior storms was fraught with unhealthy trailers and hundreds of millions of dollars wasted.

The Collingwood Group Vice Chairman Brian Montgomery, former Assistant Secretary of HUD and FHA Commissioner in Houston, says, “Texas is about to undergo one of the largest recovery-housing missions that the nation has ever seen. It’s going to be a long, tedious and sometimes frustrating process.”

FEMA announced before Harvey’s rain stopped falling that 30,000 people would need shelter from the storm that dropped a record 50 inches of rain. An estimated 9,000 displaced people are now at the George R. Brown Convention Center in Houston, which has a capacity for only 5,000.

Warming Fall Housing Markets
Sharestates, an online real-estate investing platform, has released its fall report on the hottest housing markets.

The company allows anyone to invest as little as $1,000 in real-estate projects listed on the site, and processes roughly $36 million of investments each month.

Now, it’s putting the data from all that funding to work by ranking the areas of the country that are seeing the most attention from real-estate investors.

Not surprisingly, many of the hot spots are in major metropolitan areas like New York City or Philadelphia, but there are some outliers, too, Sharestates founder and CEO Allen Shayanfekr told Business Insider.

“I was surprised to see Kissimmee, Florida to be included in the top 10,” he said in an email. “I expected to see almost all of the investment potential in markets in the upper east coast, based on the rapid growth that area continues to see year over year.”

Trump Administration Plans New Restrictions on Reverse Mortgages
The Trump administration is planning to raise premiums and place tighter loan limits on some borrowers in a mortgage program that helps seniors supplement their incomes.

The U.S. Department of Housing and Urban Development on Tuesday announced the changes in a letter to lenders to the so-called reverse-mortgage program, which allows seniors to take out a loan against the value of their home. The Trump administration feels the changes are necessary to put the program, which is backstopped by taxpayers, on a sounder financial footing.

“Given the losses we’re seeing in the [reverse mortgage] program, we have a responsibility to make changes that balance our mission with our responsibility to protect taxpayers,” HUD Secretary Ben Carson said through a spokesman.

The modifications won’t apply to borrowers with existing mortgages, but will affect those who take out new loans. Some 650,000 borrowers have outstanding reverse loans insured by the Federal Housing Administration, which is part of HUD.

Most new borrowers will pay bigger premiums upfront but lower ones over the life of the loan, lessening the risk to taxpayers if seniors live longer than predicted. Borrowers will now pay 2% of the amount of the home’s value upfront and 0.5% annually over the course of the loan.

Currently, most borrowers pay 0.5% upfront and 1.25% annually over the remainder of the loan. Some who borrow more than 60% of the amount they can borrow against the home in the first year already pay 2.5% upfront so they will see premiums go down slightly.On balance, most seniors will also be able to borrow less money. The average borrower at current interest rates will be able to borrow roughly 58% of the value of their home, down from 64%. But those limits vary significantly based on interest rates and the age of the borrower. While most seniors at current interest rates will be able to borrow less, some may be able to borrow more if rates rise.

The FHA’s reverse-mortgage program allows seniors to take out loans from private lenders against their homes to supplement pension income and help those on fixed incomes deal with unexpected or rising expenses. When the borrower moves or dies, the proceeds from the home’s sale are used to repay the loan.

CFPB Chief Exiting?
If Richard Cordray decides to run for Ohio governor, he may have to make a decision shortly. That’s the political buzz, anyway, since Cordray — director of the federal Consumer Financial Protection Bureau — is scheduled to speak at an Ohio AFL-CIO Labor Day picnic in Cincinnati.

Cordray’s federal position is supposed to be free of politics. So one of his chief critics in Congress warned him again, this time in a letter: Don’t put your political motives ahead of the public’s interest if you are rushing to wrap up your current job.

And if you intend to quit, added Rep. Jeb Hensarling of Texas, chairman of the House Financial Services Committee, say so no later than Thursday.

Cordray, a former Ohio attorney general and a Democrat, has another year left in his five-year federal appointment. But with an Ohio governor’s race next year, time is short to get in and start raising money. Several other Democrats have already said they are running, including former Congresswoman Betty Sutton, Dayton Mayor Nan Whaley and former state Rep. Connie Pillich, so Cordray would have to prepare for a primary election.

Cordray has consistently refused to address whether he will run for governor but at least one statewide elected Democrat, Ohio Supreme Court Justice Bill O’Neill, has said he understands Cordray will. This has added to complaints by Washington Republicans including Hensarling, who say Cordray and his agency try to carry out an activist, liberal agenda that dampens consumer lending and ultimately harms the public. Hensarling last month asked for an investigation into whether Cordray is already engaging in partisan politics, which could violate federal law.

Leave the East, Young Man and Woman
Of the 25 cities that millennials are moving to, not a single one is in the Northeast, according to data on 2015 migration patterns released Wednesday from personal finance site SmartAsset. Indeed, it’s places like Charlotte, Seattle and Oakland (the top 3) that the 20-34 set are moving to. What’s more, New York City saw the biggest loss of millennials with more than 29,000 going elsewhere.

And it’s not just millennials who are shunning the area. Last year, three states in the Northeast — New Jersey, New York and Connecticut — landed in the top five places people were moving out of fastest, according to 2017 data from United Van Lines. (The other two states on the list were Illinois and Kansas). And data from Pew Charitable Trusts found that while people are all about moving to the South (their population grew by nearly 1.4 million people from 2014 to 2015) and the West (866,000 more people), the population growth in the Northeast is “sluggish.”

The Northeastern exodus is particularly acute in many big cities like New York City for people of all ages. Since 2010, more than 1 million people have moved from the New York area — which includes parts of New Jersey, Connecticut and Long Island — to other parts of the country.

So why are so many northerners packing their bags?

Reason No. 1: The insanely high cost
Data released on Wednesday by personal finance site GoBankingRates.com reveals that the No. 1 financial fear of people who live in the Northeast is that they will have to live in debt forever; the Northeast is the only region of the country that ranked this as No. 1. (The other regions put retirement as their No. 1.)

And no wonder they’re worried. The cost of living across the region is among the highest in the nation, and three of the five most expensive states or districts in the country (New York, Washington D.C., Massachusetts) are in the area. (The other two states are Hawaii and California.) Having to spend so much just to get by can make getting out of debt seem much harder. And housing costs and taxes in many of these states are also sky high.

Reason No. 2: The horrendous weather
We told you winter was coming to the North — and it’s so bad that many people are leaving the Northeast in search of better weather. Indeed, the largest migration between states is from New York to Florida, according to data from the Census Bureau. And simple looks at recent winters in the Northeast explains why. For example, in 2015, Boston had its snowiest winter on record, and New York City had one of its snowiest blizzards on record in 2016.

Just ask Karen Lanovi, a lifelong New Yorker who says she “left for better weather,” moving to central Florida 12 years ago. “It has proven a great decision for my husband, myself and our three children. We for the most part, have a better life,” she says. The same reasons drove tech entrepreneur Jaimyn Chang out of the Northeast to Austin; he says he was “sick of the ridiculous snowy winters and bone-chilling temperatures” and “the constant seemingly endless gray overcast days.”

Reason No. 3: The jobs
Many companies are setting up shop in warm and less expensive places, which means that people pondering getting out of the Northeast can now find work. Texas, for example, has seen massive job growth since the recession — and some of these jobs are in fields you wouldn’t normally think of as being in Texas. For example, tech: Google, Apple, Dropbox and Oracle all recently built or expanded offices in Austin, along with many others.

About Voice Of Housing

The Voice of Housing is a mortgage industry portal published by the Collingwood Group.
Contributors include former Ginnie Mae CEO Joe Murin, former FHA Commissioner Brian Montgomery,
Collingwood Group Managing Director Tim Rood and other housing professionals.

About The Collingwood Group

The Collingwood Group is a top mortgage industry advisory group based in Washingtion, DC. Collingwood's
expertise spans all aspects of Agency, non-Agency and FHA/VA housing financing programs and Ginnie Mae
securitization activities, among others.